-One standard approach to different retailers
-One common offering for shops.
-Brand presence at POP was weak.
-Different shopper’s needs were served in a common way.
-No standardized merchandizing.
-Strive to deliver sales objectives.
- In late 2002, the Management Team of DLV decided to establish the Trade Marketing Department to adapt to the evolution of the market
-
July 1st 2003, the full structures Trade marketing department was presented
3.1.2 Mission
To bring DLV brands closer to more shoppers through intermediate forces, in a way that supports our brands strategies via superior customers and traders understanding, innovation and a high performance team with streamlined working processes (Trade Marketing Department sources)
3.2 Channel structure & definition
Distribution channel is a group of individuals and organizations that directs the flow of products from producers and customers through either direct channel or indirect channel. Since the Vietnam’s dairy market is rather huge and complex, indirect channel in which the products are distributed via various types of intermediaries has been applied for DLV as well as for most of all dairy companies in Vietnam.
The illustration below indicates that a second level of indirect distribution channel has been used to deliver DLV products to shoppers/ consumers through 145 distributors and thousands of retailers of traditional and modern channels in nationwide.
3.3.1 Traditional channels
-Shop: Medium sized outlets located in residential areas where shoppers come & buy households groceries, commodities to build up home stock for gradual family use. Outlets located primarily in main streets at the residential area where shoppers come & buy households, groceries, commodities to build up home stock for gradual use.
- Usually large area with signage (either branded or independent), more organized merchandising. Selling wide range of FMCG including premium segments
- Usually shopper with medium or high income. Buying with relatively high quantity for gradual consumption
-Top-up: Small and medium sized outlets located in the residential areas where neighborhood shoppers come & buy commodities to top up home stock for immediate use
-Market stall: Small and medium scale outlets located in public markets, offering a limited range of products, primarily fresh / raw food, packaged food / beverage and groceries, at discounted prices, where shoppers come frequently to buy commodities for everyday use at home, for socializing and sometimes stocking needs.
-Out Of Home (OOH): Medium and large sized outlets handling primarily foods and drinks where consumers come, buy and consume immediately on premises or on the move.
3.3.2 Modern channels
-Hypermarket: Very large sized, stand alone self-select outlets located outside downtown area, handling large range of categories (20 categories up), with 20-30 check-out counters, usually linked with entertainment infrastructure to serve enjoyment for one-stop shopping needs.
-Supermarket: Large sized, stand alone, self-select outlets located in residential areas, with 10-20 check-out counters, handling large range of categories (10 categories up) with focus on fresh foods and household groceries, to serve quality routine shopping, relaxing and socializing needs.
-Commart: Minimarts located at high traffic locations handling a limited category to serve convenient or combined shopping needs.
-Modern wholesales: Very large sized, stand alone self-select outlets located outside downtown area, handling large range of categories (10-20 categories), displaying products in units and bundles / blocks, selling at discounted price to serve stocking needs for professional users, families and retailers.
- Dutch Lady Shop’s background
- 1996-2000: Greenfield shops
To thoroughly understand the operation of current DL Shops network, it should be traced back to 11 years ago when the first Greenfield Shops were established in Vietnam. In the first year of DLV Ultra High Temperature (UHT) milk presence in Vietnam’s dairy market, the total share of UHT milk of DLV merely occupied 10% the market in comparison to 70% share of Vinamilk Company who was DLV’s immediate competitor at that moment (DLV DFD sources). Thanks to the great support of Vinamilk shop, Vinamilk UHT milk was considerably consumed during that period. In addition, Vinamilk set up a prohibitive policy on DLV products to be present at Vinamilk shop. Facing that situation, DLV challenged the fact of building up a network where consumers were attracted to come and buy UHT milk; and where DLV can push the UHT milk sell- out.
→ In 1996, a new established net work that had been operated as DLV retailers under a brand name “Greenfield Shops” (GF) was present in Vietnam.
The GF shops were also considered as a good place for DLV activities such as new product launch and an activation center. The establishment of GF Shops network brought along to DLV a remarkable success and made a good impression to consumers throughout the country. Besides, this created a big buzz and successfully gained a strong foothold in the Vietnamese market at that time. In fact, GF shops occupied a powerful position in the market and a number of shoppers came to GF shops to buy DLV products was more than any other shops.
- From 2000: Dutch Lady Shops
Since its first- year establishment, the operation of GF shop network had been successfully run for years. The name “Greenfield shops” had existed until 2000 when it was renamed to “Dutch Lady Shops” which was aligned to the refreshing name of the company- Dutch Lady Vietnam Company. The objectives of DL shops were to sustain sales and great achievements that Greenfield shops had attained for many years. From 2000, DLV UHT milk has been dominant the Vietnamese dairy market as a UHT milk leader. The UHT share of DLV has been remaining its number one position in the market till now.
In 2003, there was a launch of ever most monumental campaign of DLV: a power positioning campaign at Point Of Purchase that also embraced the whole DL shop network. The outcome of this campaign is to significantly help to strengthen the relationship with the retailers; and to build up a loyalty of both shoppers and shopper owners by means of display support, setting sales target and competitive bonus. However, rival competitors have also held various kinds of promotions at DL shops such as promotion girls, free gift for shoppers, and discount for shop owners. This leads to a tough competition within different brands at DL shops and within Vietnam’s dairy market in general.
According to the database of DLV Trade Marketing Department, there are:
- Estimated 12 000 – 14 000 shops out of 200 000 outlets in Vietnam (contribution 6 – 7 % to the total outlets).
- About 1500 DL shops out of 12 000 shops (contribution 12, 5% to the total shop in Vietnam)
Coverage & sales of DL shops (in billion VND)
Chapter 4: Internal analysis
4.1 Shopper analysis
In order to describe the shoppers, the theory of 6 W’s of Ferrell (Alsem, K.J., 2001, p.92) which stands for Who, What, When, Where, Why they do and Why they do not is used by answering these following questions:
- Who are the current prospective customers?
- The key shoppers of DL shops are usually housewives or the one who is in charge of the family budget and allocates the money for daily spending, saving, big expenses, etc and responsible for the purchase of all household items. Shoppers may come alone or with kids or relatives to DL shops.
- Shoppers who have medium or high income.
- Shoppers who have an intimate or personal relationship with shop owners.
- Shoppers who have their own shopping habit at a specific shop
- Shoppers who prefer a convenient shopping location (e.g. on their daily route or nearby their residence)
- A small number of re-sellers are also shoppers at DL shops
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What do the customers do with the products/services? (in this case, the products/services is DL shops)
The key shopping needs at DL shops is to build home stock for commodities with reasonable price and reliable quality for family gradual consumption. Shoppers usually spend approximately 15-30 minutes per shopping trip. The items that are mostly purchased at DL shops are either dairy products; for instance, ready-to-drink milk, ready-to-drink yogurt, eating yogurt, powder milk, or other kind of food; for instance, bottled and canned beverage, packaged food, confectioneries, snack, noodles for weekly consumption or monthly consumption. In cases of shopping for special occasions (e.g. Tet, national holidays, etc) or treating guests, the purchased items could also be beer, packaged beverage, cigarettes or dairy products for drinking and making cakes.
- Where do the customers purchase the products/services?
Shoppers can find DL shops anywhere throughout Vietnam since there are approximately about 1 500 DL shops in nationwide. A large numbers of DL shops are located in residential areas in key cities of the country. Most of shoppers choose to shop at the outlets where they are located is in the convenient areas.
- When do the customers buy the products/ services?
The shopping activities at DL shops happen regularly during the daytime. The busiest shopping hour of the day likely falls from 4-5 p.m in the evening when everybody is on the way home from work and later in the evening when this is typically a good time for shopping for Vietnam people. The peak shopping hour is was typically between the hour of 11-12 p.m and 1-2 p.m.
- Why do the customers choose the products/services?
There are some drivers for choosing DL shops:
- Neighborhood location.
- Easy access (e.g. on the way home/ work or in the central area)
- Several brands of same category available.
- Varied categories.
- Home delivery if buying in bulk.
- Reasonable and reliable price.
- Price discount / prize enclosed if buying in bulk.
- Consumer promotion activities are usually available.
- Professional staff (e.g. quick bill settlement and response to shopper’s request).
- Friendly service.
- Relationship with shop owners
- Routine shopping habit at a specific shop
- Why do prospective customers decide not to choose the products/services?
In contrast, the above-mentioned drivers also make an impact on not choosing DL shops. Shoppers can be already loyal to other shops due to the reasons of the brand name company, the personal relationship with shop owners, the convenient locations or the routine shopping habit a particular shop. A certain number of shoppers prefer to shop at the modern outlets like supermarket, hypermarket, etc.
→ In brief, the benefit for shoppers, convenience and good service are the key drivers of the outlet growth. Shoppers are getting sophisticated and choosy nowadays, hence, DLV need to thoroughly understand an insight of retailer’s needs and the shopping behaviors of shoppers to identify and respond rapidly to shifts in their attitudes. Moreover, in order to get a better understanding about the shopper that particularly concerns with the shopping of dairy products, some important remarks about shopper’s needs and behaviors towards dairy products at DL shops will be additionally mentioned below:
- While shopping, intended dairy items are normally similar to actual purchase items as the brand or the shopping list is usually already in shopper’s mind. Moreover, limited and crowed place at most of DL shops do not allow shoppers to spend a lot of time. However, due to the presence of many brands in the Vietnam’s dairy market these days, Vietnamese shoppers have more options and difficulties in purchasing decision-making than ever before.
- Apart from loyal shoppers with their “Top of mind” brand, there are still a certain number of shoppers who easily switch brands. In this case, dairy brands enclosed by an attractive incentives/ promotion activities are often preferred or the seller’s recommendation on substitute brands can be prioritized. The decision-making of shoppers is greatly influenced by retailer’s recommendation since shoppers these days tend to trust retailers rather than PGs as they used to.
- Nowadays, the Vietnamese society is rapidly developing, the standard of living of Vietnamese considerably improve within recent years. Thus, they care about their health than ever before. Shoppers/consumers tend to be more concerned about nutritional value that contains in dairy products while they are not well equipped with the nutritional knowledge. In addition, shoppers are recently quite confused with a glossary of medical and nutritional terms in the information provided by manufacturers; for example, trytophan, tyrosine, etc hence these issues lead to a complicated and unsafe feeling among shoppers or consumers towards dairy products in Vietnam’s dairy market.
4.2 Retailer analysis
The circumstance for human needs vary considerably. Therefore, to have a profound understanding of the retailer needs, we turned to the work of psychologist Abraham Maslow with his famous psychological theory “ Maslow’s Hierarchy of Needs”. In 1954, Maslow developed a new means of understanding human motivation through his hierarchy of needs. He attempted to synthesize a large body of research related to human motivation in which states that human beings are motivated by unsatisfied needs, and certain lower needs need must be satisfied before moving to the next higher level(according to A Theory of Human Motivation - 1943). We applied his theory to our observation and experience of retailer’s needs, and felt that there is also a hierarchy of needs.
- Retailer’s needs based on Maslow theory:
business innovation and creativity, business spontaneity, full potential, perfectionist, wisdom in business.
business achievement, confidence, autonomy, self-respects, appreciation and value (worth), reputation.
business relationship, trade intimacy, belonging to a business group, business loyalty.
relative business security, stable income, stable consumers, finance reserves, healthy business.
recruitment of customers, basic earnings that is sufficient to afford the essentials of life.
-The illustrations of Maslow’s hierarchy of needs translated into retailer’s needs-
- DLV trade offer for shops based on Maslow theory:
Recognized as a Triumphant Businessman/ Best Retailer Of The Year award in mass promotion.
Recognition rewards for Best-sellers of Region (e.g. a monumental annual gala for big players only)
DLV enhance relationship between DLV & retailers (e.g. birthday gift for retailers, etc)
DLV always support them to create a safer business (e.g. a long-term plan or contract)
DLV support with basic rewards
like cash rewards/ material support
-The illustrations of DLV trade offer based on Maslow’s hierarchy-
The classification of DLV shops is as follows (Trade Marketing Department sources)
According to the classification of shops and the theory of DLV trade offer for shops based on Maslow’s hierarchy, DL shops are classified as high quality shops and supposed to stand at Belonging stage of the Maslow’s hierarchy. However, the reality is that trade offer from DLV for DL shops are just aligned to Safety stage rather than the higher level of this hierarchy: Belonging stage. In fact DL shops are emerged to stand at Safety stage in the Maslow’s Hierarchy, hence, due to several reasons:
- DL shops are branded shops by DLV which is one of the largest and well-known dairy companies in Vietnam.
- DL shops retailers are rather long-lasting and big players in the market.
- DL shops have been operating for years with an annual contract and support from DLV
The business of DL shops retailers is more or less safer than anyone else. Therefore, the physiological needs are no longer controlling the thoughts and behaviors of most of DL shops retailers, the needs for their safety in business are almost satisfied as well. Thus, most of them almost step over the Security phase and the next stage of needs for belonging can be likely active.
4.3 DL shops activities in the past
The overview of the key activities of DL shops in the past would be mentioned in this chapter as an additional part of the internal analysis. Looking back on the DL shops activities over the last few years would undoubtedly provide a more comprehensive view and a thorough understanding of the operation of DL shops network. This overview will be especially aimed at the activities from the end of 2003 - beginning of 2004 since there was a clear channel structure with a presence of Trade Marketing department and the launch of Power positioning campaign of DLV.
- To build up power positioning at DL shops.
- To enhance awareness of shoppers about new packaging.
- To attract shoppers going to DL shops to buy DLV products.
- To build up a loyalty of shoppers and shopkeepers.
- Do merchandising inside and outside DL shops.
- Do promotions at DL shops: plastic bag, “power positioning” display contest for shopkeepers, gift for shoppers.
- When shopkeepers implement the contest as the display requirements: eye catching, eye level, grouping, and no of product display from DLV; they will receive 5 kg plastic bag.
- Besides, if shopkeepers had a best performance in display activities such as creative, impressive, attractive display; they could win a prize. In case of having the same qualified shops, the winners were selected based on their turnover by trade marketing and sales force( Trade Marketing sources):
- To make a good relationship between DLV and shop owners.
- To maximize an image of DL shop to enhance shopper’s awareness about DL shops.
- To expand the coverage of DL shops.
- Selecting new DL shops as requirements
- Good location: habitant area, high traffic
- High turnover: at least 7 mil/ month
- Good relationship with DLV: cooperation with DLV to do promotion activities
- Having business license
- Achieving display and buying requirements from, shop owners will receive benefit as follows
- Long term: discount 1% based on turnover
- Short term: each quarter DL V will have at least one promotion program to support these shop
- Besides, there was a bonus of 100,000 VND/shop/ year
- To reinforce the display at Dutch Lady Shops.
- To increase turnover.
- To sustain business relationship with DL shop owners.
- Satisfying display and sales target requirements, shop owners will receive 1 % incentive based on turnover and display support based on the registered display level.
- Moreover, in quarter If DL shop owners buy at least 150 carton DL UHT/ 2 month, they will get 1 lucky draw ticket (100% win) to earn the prize as follows( Trade Marketing sources):
The purposes of this incentive were to push sales and to build up relationship with DL shop owners.
- To get 50% shelf DLV share at DL shops
- To maximize availability and visibility of DLV brands
- To make a good relationship with shop owners
- If shop owners satisfy display and sales target requirements , they will get 1 % bonus based on turnover or fixed bonus which is equal 1% of turnover (by DL UHT 180 ml).
- Incentive for IMP & Friso display program which is also applied for normal shops in shop channel.
- Fixed incentive for RTD display program: 2 cartons DL UHT 180ml/quarter.
- DL shop conference or traveling by choosing shops that have good performance.
→ The conclusion after scanning through the overview activities of DL shops over the past few years is that DL shops have been operating for years under many short-term and repetitive activities; and there has not been any long-term strategy for the operation of DL shops.
4.4 Strong points & Weaknesses:
In conclusion, the strong points and weakness of DL shops are summarized as below:
Strong points:
- DL shops are branded and empowered by a well-known company
- DL shops are inherited a strong base and reputation from the operation of Greenfield shops in the past
- DL shops are one of the pioneers of branded shops in Vietnam
- DLV seems to build a good relationship with most of DL shops retailers. Hence, there are likely positive response towards DLV from them
- DL shops are closely link to Vietnamese shopping culture
- DL shops have become one of the preferred POPs for shoppers
- DL shops are the flagships of DLV distribution channels since they are considered as a turnover generator for DLV
- DLV always give more attention and support to DL shops
Weaknesses:
- DLV more focus on the sales than the image of DL shops
- DLV has not yet fully exploited the role of retailers
- The knowledge about nutrition-related areas of retailers is very limited
- There is lack of long-term plans for DL shops
- DLV had not yet established a remarkable and standardized identity for the whole DL shops network.
Chapter 5: External analysis
5.1 Macro environmental factors
In order to identify the macro environmental influences which might affect the performance and strategic development of DL shops, a PEST analysis is used. It consists of the following factors: Political, Economic, Social – Cultural and Technological factors
Political factors:
It is predicted that more and more foreign retailers will enter Vietnam's retail market soon due to the Government’s open-door policy encouraging foreign investors. In fact, the Vietnamese Prime Minister has recently approved steps to open Vietnam's retail market to foreign competitors. Allowing foreigners access to the local market is seen as a key step ahead of Vietnam's entrance into the World Trade Organization (WTO) and a sticky issue between Vietnamese and WTO negotiators. According to the Dispatch 1701/TTg-QHQT which was issued on Oct. 23, the Vietnamese government will establish new policies to conditionally open the domestic retail market to foreign firms.
According to the Ministry of Foreign Affairs, with the foreign policy of openness which is to befriend and cooperate with all countries in the world on the basis of equality and mutual benefit, Vietnam has established diplomatic relations with 167 countries, and has signed multilateral and bilateral trade agreements with over 80 nations. A wave of foreign retailers that tend to hold an advantage in terms of technologic, financial and managerial experience, for instance, the US’s Walmart, France’s Carrefour and the UK’s Tesco are exploring ways of entering Vietnam would create an adverse effect upon traditional retail system in general and DL shops network in particular in a next few years.
Economic factors:
Vietnam's access to WTO provides an important boost to Vietnam's economy. According to Women’s New (June 20, 2007), the country's economy grew by 8 percent in 2006, and average per capita income has increased to $723 in 2006 from $485 in 2003. government survey found that the wealthiest individuals earned 12.5 times more than the poorest, who mostly live in rural, remote areas and depend on agricultural production. In the past five months, Vietnam’s economy continued to develop steadily with a GDP growth rate of nearly 7.9 percent – the highest compared to the same period of previous years
The economic development has led to dramatic improvements in the quality of life in Vietnam. According to the Ministry of Foreign Affairs, the average life expectancy was raised from around 50 in the 1960s to 70.5 at present. The poor household ratio dropped from 70% in 1980 to below 7% in 2005 thanks to the national poverty reduction programs. Vietnam was recognized by the international community as "one of many successful stories in economic development”. Due to the improvement of living standard in Vietnam, Vietnamese shopping needs will be rose and people will demand for a better service. Moreover, shoppers are also becoming more sophisticated and choosy in making purchases nowadays.
According to the Ministry of Foreign Affairs, Vietnam has created an ever more competitive and dynamic economic environment. External economic relations have been expanded and the flow of foreign direct investment increased. With the appearance of several newly-established companies and foreign investors, the competition within the dairy and retail market in Vietnam is becoming fiercer than ever. They are all how economic factor might influence on the operation of DL shops.
Social- Cultural factors:
The social and culture life of Vietnam has deeply influenced the shopping behaviors of Vietnamese people. Motorcycles are considered as the most popular forms of road transportation in daily lives of Vietnamese people throughout the country and the habit of driving motorcycles has become a vital part of Vietnamese culture for decades. Nothing symbolizes the country's massive economic and social shifts of the last decade better than the rise of two-wheeled vehicles. According to the General Statistic official of Vietnam, the number of motorcycles on Vietnamese roads has soared from fewer than 500,000 in 1990 to nearly 14 million at present, making Vietnam the world's fastest-growing motorcycle market, third largest in the world behind only China and India. The numbers of automobiles is booming and is expected to increase in the future.
The habit of most of Vietnamese shoppers to do household commodity’s shopping is stop at the outlets where its location is convenient for their daily route and where they can park their motorcycles either in the street pavement or in front of the outlets for a quick shopping. The purchasing process could also happen while shoppers are even still on wheels. It is evident that there is a close link between the driving motorcycle culture and the shopping behavior of Vietnamese people. Hence, shops will exist and continue to grow in the future as long as there is still a presence of motorcycle in Vietnam’s daily life. Moreover, most of the shoppers like to have an interactive conversation and relationship with shop’s owners that they could not find in modern outlets. This is also considered as a part of the culture of Vietnamese people.
Technological factors:
The development of Vietnamese economy will certainly leads to the development of technology; especially the development of information technology in production and service business. The widespread usage of information technology is evident in almost every aspect of the Vietnamese economy. In Vietnam, almost all of the outlets in modern channel such as supermarket and hypermarket have a good database system for the information collection and control of their stock and customers. The database can be collected by the mean of the loyalty cards, cash registers, bar-code system etc…
On the contrary, the operation of most of shops in general and DL shops in particularly are quite primitive in term of collecting data and managing their business. Barcode system is completely non-existent in shops. Computer is used for just basic accounting purposes. Lots of DL shops retailers, especially in rural areas are still using calculator and paper for managing their financial plans and businesses. The development of technology in Vietnam might cause some certain impacts on the operation of DL shops in the future if DLV does not have any suitable plans and timely reactions to upgrade DL shops network.
5.2 Competitor analysis
Vietnam’s dairy market is becoming more competitive nowadays with the presence of many rivals companies. Therefore, to occupy shelf share at POP, all competitors organize mass display. Moreover, they give more benefit to outlets owners by complex program to increase sales volume and visibility. At DL shops, almost all of competitors have run similar display program in which are basically based on many levels of facings and turnover in combination with trade promotion program to push sale-out and build relationship with retailers.
By an outstanding mechanism such as running point collection program via display, PG, volume sale, new consumer introduction, Abbott stood out from all other competitors and remarkably made a good impression on retailers. The following information will reveal a summary of all activities which competitors had deployed at DL shops in 2006.
.
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Abbott: with long-term program
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Long-term point collection program: for the whole year
There are 3 kinds of point collection program
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Basic collection: based on number of cartons/month
- based on monthly sales target which was set by Abbott
- based on % growth in 2006 in comparison to 2005
✰ VIP club member: Lucky draw program based on point collection from Basic collection and Collection 1
-First winner : 15 000 USD
-Second winner : 10 000 USD
-Third winner : 500 USD
-Fourth winner : 300 USD
-Last winner : 100 USD
- Registered display level+ eye catching display
- Light box
- Recruitment of new shoppers
- PGs
-First winner : 10 000 USD
-Second winner : 800 USD
-Third winner : 500 USD
-Fourth winner : 300 USD
-Last winner : 100 USD
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Special incentive for Hochiminh city only: from 01/06/06 den 31/08/06( 3 months)
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Vinamilk: long term IMP display was run from 27/2/2006 till 30/12/2006 with the highest incentive up till 1,200,000 VND/ 216 facings. Besides, retailers can get quarterly bonus via display result checking
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Long term IMP Display program: from 27/2/06 till 30/12/06
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Short-term RTD display program: from 23/07/06 till 19/08/06
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Display program: from 01/08/06 till 31/06006
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Incentive:
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Mead Johnson: long term display with many level 174 facings, 81 facings, 42 facings with incentive 3.500 to 4.000 vnd/ tin
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Display program: from 01/01/06 till 31/12/06
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Incentive: 1 – 2% discount based on the invoice
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Display program: from 26/06/06 till 31/08/06 (2 months)
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Special Display program: from 01/07/06 till 31/08/06 (2 months)
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Display program and sales target incentive: from 25/05/06 till 25/07/06 (2 months)
B Incentive:
UHT Nuvi: 1 cartons get 5 000 VND
UHT Nuti: 1 cartons 110 ml get 4 bottle
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Display program: from 1/02/06 till 31/07/06 (6 months)
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Incentive: 2% discount based on the invoice
5.3 Opportunities & Threats
The external analysis part is concluded as below by the summary of the opportunities & threats for DLV
Opportunities:
- DLV has possibility to build up a sustainable business relationship with retailers
- DLV Utilize the important role of retailers to convey DLV image
- Retailers as a ambassador for DLV can encourage shoppers to switch to DLV brands
- Reinforce DL shops image and performance
- The revenue of DLV brands at DL shops is still greatly increased
- DLV can use DL shops as places for brand building
Threats:
- The development of modern channels could be a threat for DL shops in the future
- Government’s open-door policy to encourage foreign retailers to enter Vietnam’s market.
- There is fierce competition within dairy and retail market in Vietnam
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Shoppers and retailers are recently becoming more sophisticated and less loyal
Chapter 6: SWOT analysis
- SWOT analysis
The SWOT analysis evaluates the strengths, weaknesses, opportunities and threats of DL shops. After examining the internal and external aspects in the previous chapters; all the relevant strengths, weaknesses, opportunities and threats are compiled into the SWOT analysis under the table below:
- Confrontation matrix
Based on the SWOT analysis, a confrontation matrix can be formulated in order to give an overview of several possible strategies that DLV may follow through combining its strengths - weaknesses, strengths - threats, weakness -opportunities and weakness - threats.
S-O strategies
SO1 : S1-S2-S3-S6 & O4-O6
By utilizing its existing strengths and collaborating with retailers to achieve Win-Win results, DLV could regain the strong position of DL shops in term of the image and performance in the market.
SO2 : S2-S3-S6 & O1-O2
DLV would build up a strong-tie relationship with retailers to gain their support and commitment. Hence, DLV could utilze them as the ambassadors for DLV brands at DL shops.
SO3 : S1-S4-S5-S8 & O5
DL shops are inherited a reputation from the Greenfied shops and one of the preferable outlets for shoppers for years due to the influences of Vietnamse shopping culture. Hence, there is defenitely a great chance for DLV to increase its potential revenue at DL shops.
W-O strategies
WO1: W1-W2 & O1-O2
Even though DL shops retailers lack of nutritional knowledge and the role of retailers is still under exploitation, DLV could overcome these weaknesses by building many permannent business activities and frequent education programs for retailers. As a result, DLV would obtain a strong relationship with retailers and enhance their knowledge about nutrition-related areas. Through the initiatives above, the important role of retailers as the ambassadors for DLV brands can be likely active.
WO3:W4-W5 & O4-O6
There are possibilities to reinforce DL shops image by innovating the merchandising at DL shops in order to make the image inside and outside of DL shops are impressively aligned with each other. Therefore, the remarkable and standardized identity would be established for the whole DL shops network.
S-T strategies
ST1: S1-S2-S3- S4-S5-S8 & T1-T2
The reputation from the past, the well known mother brand together with the intimacy in relationship with retailers and the close link with Vietnamese shoppling culture help DL shops to strengthen its competitive advantages and distinguish itself from others. To a certain extent, they would help to defend the DL shops from the threats of modern channel and and the penetration of foreign retailers due to the encouragment from Vietnamese government’s open-door policy.
W-T strategies
WT2: W1- W2 & T4
It is easier to land a new shopper than to retain an old one. In order to gain shopper loyalty, DLV should make them perceive that DL shops are trustworthy shops since shoppers can buy not only quality products but also always receive reliable and useful information about nutrition knowledge of DLV products that they cannot find anywhere else.
WT2:W1-W2- W3 & T1-T2
Facing the threats from the development of modern channel and the penetration of foreign retailers, DLV should soon set up an efficient strategy for a long-term operation of DL shops that is supported by many long-term business activities in order to step by step upgrade the DL shops network.
Chapter 7: Circumstances & strategic choice
7.1 Contemporary circumstances
Before formulating a strategic choice for DLV, the overview of the key issues and contemporary circumstances of DL shops should be mentioned at first.
DL shops have been operating for years under a support of many temporary activities such as incentives based on turnover, sales target and display support etc… instead of having a long-term plan from DLV. Besides, there had not been a timely response from DLV in order to keep up with the evolution of the market. Hence, the initial image of DL shops in the market has been gradually weakened than they used to be in the past and DL shops are slowly losing its performance. These pivotal issues lead to the ambiguous positioning of DL shops for the time being. For this reason, the repositioning strategy for DL shops should be approached.
In the last few years, promotion girls (PGs) whose role is considered as a brand ambassador to push sale- out made a great impact in the purchasing decision making of shoppers. However, due to the widespread presence of PGs in many other fields like alcohol, beverages, tobaccos and consumer goods, the voice of PG has been significantly less effective and trustworthy than ever. Consequently, shoppers nowadays turn to trust retailers and are considerably influenced by the retailer’s words of mouth. Moreover, retailers are the one who directly have daily interaction with shoppers. Back to the operation of Greenfield shops in the past few years, retailers used to play an important role of being the most effective way in approaching shoppers. Nevertheless, this role has never been more important as it used to be since DLV has not yet utilized retailers as the final touch point to influence shoppers until recent times.
8.2 Strategic choice
As mentioned above, it is vitally important to reposition DL shops in order to regain its strong performance and images in the market. Repositioning DL shops would be the best strategic choice for DLV at the moment. Then, the question of how DLV could reposition DL shops would be immediately emerged. For the current situation of DL shops, the Retail Dialogue Marketing in which DLV would utilize the important role of retailers as a pathway to reach shoppers would be the appropriate answer for the above question. There are two objectives that DLV would obtain by following this strategy:
- To build up DL shop retailers as brand advocates for DLV brands.
- To re-innovate the image of DL shops.
The purpose of this Retail Dialogue Marketing is to closely reach shoppers who are obviously the DLV’s ultimate goal through retailers by frequently building business relationship with retailers and always rewarding them based on their performance to achieve a Win - Win - Win result. The outcome of Retail Dialogue Marketing is to build up DLV’s brand advocacy; thus, to obtain their sustainable support and loyalty for a long-term trade business. With this strategy, DLV could create a changing face of retail for DL shops. Making it work outstandingly, however, remains the challenge is how to build a sustainable business relationship with retailers in which the relationship must have the mutual benefits for retailers, shoppers and DLV.
Chapter 8: Top initiatives & action plan
8.1 Top initiatives
There are several top initiatives which DLV should deliver to DL shop retailers
- Innovative merchandising concept for DL shops
- To gain a new perception of the refreshing image of DL shops from shoppers.
- To build up a standard layout (branding outside and display image inside) for DL shops.
- To outperform DLV merchandising activities at DL shops
- To transfer nutritional information of DLV products from technology terms into friendly & simple sound message to communicate the functional benefits of DLV products to shoppers.
- Apply “Dutch Lady” merchandising concept with a friendly image of Dutch Lady Girl in a traditional costume for the whole DL shops network.
- Apply “Language of shopper” concept to DL shops in which there will be nutrition information related to the benefit of DLV products in friendly and simple message in the ” shelf-talker”
- Apply “shelf-talker” on the independent “Dutch Lady” shelves to distinguish DLV products from others.
- Apply Dutch Lady Standee at every outlet to distinguish DL shops with others.
- Fix the central location and the space display of DLV products by categories of Dutch Lady Girl shelves
- Permanent business building activities with retailers
- To maximize the revenue of DLV brands at DL shops.
- To build a tight relation shop with retailers in order to attain their wholehearted collaboration and sustainable loyalty for DLV brands
- Quarterly/yearly trade promotion programs for DL shops only
- Always reward retailers based on their performance( sales target, display)
- Organize the quarterly/annual retail conference for DL shops retailers
- Utilize shop-helper/sellers at DL shops as the auxiliary help to push sales - out.
- Regular education programs for retailers
- To enhance a more professional retailer’s base
- To enhance retail advocacy for DLV brands and retailer’s knowledge on DLV products and related nutrition area.
- To build up DL shops as trustworthy and friendly shops by good service from retailers.
- Organize an education or training program for DL shops retailers.
- Hold “Dairy Nutritional Knowledge” contests between DL shop retailers.
- Provide retailers with a handbook about the knowledge of DLV’s products
- Retailers will encourage the existing shoppers to switch to DLV brands by informing shoppers about related nutritional knowledge.
8.1 Action plan
- Innovative merchandising concept for DL shops
The merchandising team of DLV will deploy “Dutch Lady girl” merchandising concept to DL shops in which the DL shop’s image inside and outside are impressively aligned with each other. Shoppers will be impressed and recognize DL shops by the identical image of a Dutch girl in traditional costume at every DL shop. The POSM design for DL shops must be identical as follows:
- A Dutch Lady Standee is placed in front of the main entrain of the outlet as a representative symbol for DL shops.
- An eye-catching and recognizable “Dutch Lady” shelf is positioned at the central place (opposite the main entrance) of every outlet.
- The space and number of displays of DLV products are fixed by categories (IMP, Friso, UHT and SCM) on Dutch Lady Shelf.
- The shelf-talker which is stuck at the front edge of the Dutch Lady shelf comprises the slogan and logo of DLV; and provides nutritional information in simple and friendly message to communicate the functional benefits of DLV products.
- Permanent business building activities with retailers
DLV will organize different kinds of activities to strengthen the intimate relationship with retailers. As long as retailers feel that belonging to a great DLV community as cooperative members they always receive great support from the company; DLV can win over retailers by their sincere support and commitments to DLV.
Retailers will be supplied with information about nutrition, products, program and convey these information to shoppers to persuade them to buy DLV products.
- Trade promotion are run quarterly and annually at DL shops by Trade Marketing department to encourage retailers purchasing DLV products
- Coordinate with Consumer Marketing to run shopper promotion at DL shops to help in pushing sales-out and retailers are play as a key party to run promotion which is supported by DLV
- Salesman together with retailers will work out to reach an agreement in monthly sales target( under the control of DLV)
- The incentives are given to shop-helpers/sellers
- DLV will organize quarterly retail conference for all DL shops retailers in each area
- Rewards retailers based on performance:
.retailers who achieve sales target which is monthly set by SM
.retailer who achieves a largest turnover
.retailers who achieves the best growth compared to the previous quarter.
.retailers who attain “Top 15 best-sellers” award in the area (this award is only considered in last quarter of the year)
- Strengthen the intimacy between DLV and retailers
- Let retailers benchmark with neighboring DL shop retailers in order to improve themselves.
- DLV can timely capture retailer’s feedback and concerns
- DLV will annually hold an monumental “DL Shops Retail GALA” for Top 15 Best-sellers of different areas in nationwide which are to:
- Participate in lucky draw program to win premium prices
- Offer premium rewards for retailers who honorly achieve “Top 10 best-sellers reward for the year”
- Regular education programs for retailers
Once retailers are well equipped with knowledge of DLV products, they will translate this information to shoppers and make a great impact in their purchasing decision. A result is to encourage existing shoppers to switch to purchase DLV brands and to make retailers become brand advocates for DLV. In addition, DL shop retailers can take care of recommendation job for shoppers who are new users to DLV brands or who have difficulties in their purchase decision-making by delivering trusty information and offer appropriate products to them. As a result, shoppers will perceive DL shops as professional and trustworthy shops with
- As the retailer is our advocate, the communication should be clear, short and easy to deliver
- The training program for DL shops retailers is enclosed in every quarterly conference in which retailers are educated about the knowledge of DLV products to make sure that all of retailers will participate in this program.
- Shop-helpers/ sellers are encouraged to join the training program by the incentives.
- A handbook about the knowledge of DLV’s products will be distributed to each DL shop
- DLV will annually hold “Dairy Nutritional Knowledge” contests between DL shop retailers with the honorable certificates for the winners and premium reward
Chapter 9: Conclusion
As mentioned in the first chapter of the report, the central question is that:
How could DLV re-position DL shops in order to keep pace with the evolution of the market?
In order to reposition DL shops, the feasible solution is to utilize the important role of retailers as a pathway to approach shoppers. Through building an iinnovative merchandising concept; delivering regular education programs and permanent business to retailers, DLV has a lot of confidence to create a changing face of retail for DL shops. Hence, we strongly believe that DL shops will have a promising future in the next few years. The report is concluded by a desired positioning of DL shops that DLV would optimistically achieve in the near future:
“Dutch Lady Shops are perceived as innovative and trustworthy shops where retailers with their sustainable collaborations and commitment to DLV are always a brand advocate of DLV to convey DLV brand image to shoppers”.
Bibliography
Article
“Attractive retail industry”. Dau Tu. Monday, March 13 2006
“Vietnamese retail market is more and more attractive “. Hanoi Moi Tin Chieu, Sunday, March 5, 2006
“Domestic retailers urged to think big “.Vietnam news. Friday, March 10, 2006
Books
Mark Saunders, Philip Lewis & Adrian Thornhill, Research Methods for Business Students. Pearson Education, Harlow, London, etc, 2006, 4th edition
Alsem, K.J. (2001), Strategische Marketingplanning: Theorie, Technieken en Toepassingen, derde herziene druk, Wolters Noordhoff/Stenfert Kroese, Groningen.
Johnson. G & Scholes.K & Whittington.R, Exploring Corporate Strategy, Text and cases, Pearson Education Limited 2006, 7th edition
Brassington & Pettitt, Principles of Marketing, Pearson Education Limited 2003, 3rd edition
Kotler. P & Armstrong. G Principles of Marketing, Pearson Education Limited 1999, 8th edition.
Internal publications:
“Magazine 3 Corporate magazine for our employees all over the world Volume 7”, Frieslandfoods., June 2006
“Suc song moi ” Volume 7, June 2006
“Hom nay va ngay mai” Volume 16, January 2007
“Work Instruction”, 31 December 2002
“Quality manual & Procedures”, 14 March 2003
Internet
Ministry of Foreign Affairs. Foreign Investment into Vietnam. Retrieved on June 6, 2007 from the website:
Vietnam- culture.com. Social relationships. Retrieved from the website
Saigon Times. Thach thuc cho nha ban le trong nuoc, Retrieved on June 15 2006 from the website
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Maslow’s hierarchy of need”. Retrieved on June 6 2007 from the website:
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Get ready for life, 1996. Retrieved from the website:
Outsourcing Strategies for Multichannel Retail Operation”, 2007. Retrieved from the website:
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General Statistic official of Vietnam. Retrieved from the website:
Vietnam Chamber of Commerce and Industry. Retrieved from the website:
Vietnam investment review. Retrieved on 5-11 June, 2006 from the website:
Vietnam economy times. Retrieved from the website:
Investment and Trade Promotion Centre Ho chi minh. Retrieved from the website:
Foreign direct investment in Vietnam an overview. Retrieved from the website
Thanhnien news. Retrieved from the website
Communist Party of Vietnam Online Newspaper. Retrieved from the website
Nhan Dan. Retrieved from the website:
Economy of Vietnam. Retrieved from the website:
Vietnamnet Bridge. Dairy producers try to milk market share. Retrieved on June 9,2006 from the website:
Intranet
Dutch Lady Vietnam DFD network.
Trade Marketing Department sources
Appendices
Appendix 1: Brief transcript of the interview with Mr. Thai Van Tuan
Senior Channel Manager of Traditional channels at Trade Marketing department of DLV.
- Before the presence of Greenfield shops, how could DLV deliver its products to customers?
The distribution of Greenfield shops at that time were not under the control of price and distribution system. DLV products were mainly delivered via wholesales (but not as level as distributors)
- Could you please give me a short overview of DL shops operation recently?
The performance of DL shops has not been as strong as it used to be before.
The role of retailers have not yet exploited as a final touch point to shoppers.
All of the plans for DL shops are just short term plans which have been run for several months till 1 year.
DLV has not yet set up any strategy which is in line/ keep up with the evolution of the Vietnam’s market.
- So, what do you think are the pivotal issues of DL shops at present?
Currently, the key issue of DL shops is due to the lack of a long-term strategy
- What do you think about the idea to utilize the role of retailers as the pathway to reach shoppers?
It is a good idea and can be promisingly apply to DL shops since retailers are the ones who have direct contact with shoppers and can make a great impact to the purchase decision-making of shoppers
- What would be the threat for DL shops in the future?
After our strategy is already worked out, competitors may try to convert DL shops into shops which are under their brands.
- How could DLV plan to cope with this threat?
We could not say anything in advance since everything is still ahead. Depending on the actual situation, DLV will have the appropriate plans then.
- Do you think that DL shops would likely be transformed into modern channels due to the development of these channels in the future?
In my point of view, shops will not be vanished from the market due to the Vietnam’s shopping culture and the convenient characteristic of shop channel. However, shops are predicted to exist in the Vietnam’s market for at least more than 20 or 30 years and are likely upgraded into centralized managed and well- organized shops which is called “retail chain”.
Appendix 2: Brief transcript of the interview with Ms. Pham Ngoc Minh Chau.
Assistant Channel Manager at Trade Marketing Department of DLV, a project owner of “Dutch Lady Shops” plan in 2007 and a former student at IBMS, The Hague University.
- How and why were Greenfield shops established in Vietnam in 1996?
By investing and capitalizing on existing shops, Greenfield shops were set up to penetrate Vietnamese dairy market and to deliver products of Foremost (a former name of DLV) to consumers.
- What was the positioning of Greenfield shops at that time?
Greenfield shops were the shops which were perceived as official agency of Foremost company to distribute Foremost products to Vietnamese consumers.
- What do DL shop retailers expect the most nowadays?
Retailers always require cash rewards or material support from the company, for example: immediate cash receiving or merchandising display such as shelf, visicooler and so on.
- What are the insight needs of DL shop retailers at present?
Most of retailers are afraid of competition on the internal market (new shops or modern trade establishment or upgrading). Some of them unintentionally satisfy with the support from DLV since there is a misunderstanding for the support to DL shops and to the normal shops. Some big retailers expect the satisfaction for self-esteem level.
- What are the most distinctive factors of DL shops in comparison with the normal shops?
The only distinctive factor which differentiates DL shops with normal shops is that DL shops are branded shops and always get a 1% commission based on turnover if they achieve sales target.
- What do you think about the forecast of DL shops?
Shops in general and DL Shops in particular will gradually decline in the near future as long as motorbike is sustained and run in Vietnam. In my point of view, DL shops will likely be upgraded to modern retail chain in the future.
- In your opinion, what would be the major threats for DL shops in the future?
-WTO entry with big retailer’s penetration
-The sharply development of modern channel
Appendix 3: Picture illustrations
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Illustration 1: “Dutch Lady” image applied for “Dutch Lady” merchandising concept
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Illustration 2: Dutch Lady Vietnam Company
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Illustration 3: An outside view of DL shops
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Illustration 3: An inside view of DL shops